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DMV Permit · Rules of the Road · Topic Study Guide

Insurance: Practice Questions & Explanations

3 Rules of the Road questions on insurance, each with a worked explanation citing the source handbook.

Source: State DMV driver handbooks and Uniform Vehicle Code.

Why this topic matters

These questions cover this specific topic in depth. Each one cites the source handbook so you can verify and read further.

Below are every insurance question in our Rules of the Road bank. Read each question, try to answer before reading the explanation, and use the source citations to look up anything you want to verify in the official handbook.

1. Is auto insurance required to drive a vehicle on public roads in the US?
  1. A No, insurance is always optional
  2. B Yes, every state except (essentially) New Hampshire requires drivers to maintain liability insurance or equivalent financial responsibility; minimums vary by state
  3. C Only in cities
  4. D Only for commercial vehicles

Explanation

Every US state except New Hampshire requires drivers to maintain auto liability insurance or equivalent financial responsibility (a cash bond or self-insurance for those with substantial assets). New Hampshire requires drivers to be able to demonstrate financial responsibility if they cause a crash, which most achieve by carrying insurance even though not strictly required. Minimum liability coverage varies by state — typical minimums are $25,000/$50,000/$25,000 (bodily injury per person/bodily injury per accident/property damage), though some states require higher and many drivers carry more. Driving without insurance is a serious offense: large fines, license suspension, and potentially being personally liable for all crash damages.
Source: State driver handbooks, Insurance Requirements
2. If you are involved in an accident, what should you do?
  1. A Drive away if no one appears injured
  2. B Stop, check for injuries, exchange information with the other driver (name, address, license, insurance, plate), report the accident to police if required, notify your insurer
  3. C Only call your spouse
  4. D Continue driving and report later

Explanation

Required steps after an accident: stop at the scene (leaving the scene of an accident is a serious crime — 'hit and run'); check for injuries and call 911 if anyone is hurt; exchange information with other drivers including name, address, driver's license number, insurance company and policy number, license plate, and contact phone; report the accident to police, especially if there are injuries or significant damage (state laws vary on when police report is required); take photos of damage and the scene if safe; do not admit fault; notify your insurance company promptly. Some states require reporting any accident with property damage above a threshold ($500-$2,500 depending on state) to the DMV.
Source: State driver handbooks, Accident Procedure
3. Why are drivers generally required to carry liability insurance (or proof of financial responsibility)?
  1. A To increase costs for no reason
  2. B To ensure that a driver who causes a crash can pay for resulting injuries or property damage to others
  3. C Only luxury cars need insurance
  4. D Insurance is optional everywhere

Explanation

Most states require drivers to carry liability insurance, or otherwise demonstrate financial responsibility, so that if a driver causes a collision, there are funds to pay for the injuries and property damage suffered by others. Liability coverage protects victims and the at-fault driver from catastrophic out-of-pocket costs. Driving without required insurance can lead to fines, license suspension, and personal liability for damages. Minimum coverage amounts and rules vary by state, and drivers usually must carry proof of insurance and show it when requested. Understanding the purpose of mandatory insurance is part of the license-and-insurance rules of the road.
Source: State driver handbook, Financial Responsibility

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